The Untapped Downtown Housing Market

Downtown Kalamazoo is seeing a boom in urban housing development, from The Exchange which has grown to 140 residential units to the recently completed Arlington Lofts which houses 6 units. The question is, how does a smaller developer take part in this housing rush?

The Market

First, let’s establish that there is still room in the market for new product. When The Barton Group completed the Occupancy Study for Downtown Kalamazoo, Inc. in early 2016, we found that only 6 of downtown’s 600+ residential units are “vacant,” and that even those were being filled from waiting lists.

Further, the existing product in downtown Kalamazoo still consists mostly of luxury loft apartments, which don’t come close to meeting the needs of potential residents. For-rent apartments, after all, are only one of the housing types that are popular in urban areas; we have virtually none of what is being called the Missing Middle, and no for-sale projects on the books for the near future.

Here are some Missing Middle housing types that are recommended in the 2014 housing study conducted by Zimmerman/Volk Associates on behalf of Downtown Kalamazoo, Inc. Each has its merit, especially for a smaller developer.


Urban TownhomeThe townhome is the quintessential urban housing type, yet none exist in downtown Kalamazoo. They offer private entrances, can include small private outdoor spaces, and can provide an attractive & welcoming streetscape. They are often built as owner-occupied properties.

If you don’t believe that there is a market in Kalamazoo for attached owner-occupied units, consider that AVB’s Waldon Woods project is selling attached condos for $300,000+ in the City of Kalamazoo, and that one condo unit in downtown Kalamazoo sold in 2016 for $1,000,000. Given the strength of our local housing market, now may be the time for empty-nesters to sell their homes in suburban neighborhoods and use that equity to purchase something within walking distance of downtown’s amenities.

Duplex, Triplex and Quadplex

DuplexAn unnoticed opportunity to add to the urban housing mix lies in the smaller parcels at the edges of downtown. Not every project needs to be a multi-million-dollar investment; an owner-occupant can build up to four units and still be offered FHA terms on a 30-year mortgage. Encouraging this type of development will have the two-fold effect of adding the vibrancy that downtown residents bring, while helping to build wealth for the property owner.

FHA will allow for low-money-down loans on the purchase, construction, or rehabilitation of 1-4 unit buildings, provided the owner lives in one of the units. Check the FHA website for details.

Bungalow Courtyard

Bungalow CourtyardJust because people want to live downtown does not mean that outdoor space is unimportant to them. A courtyard development allows for communal outdoor space surrounded by one large (typically u-shaped) building or a group of smaller buildings.

Downtown Kalamazoo offers the Marlborough Condominiums and the Lovell Square Apartments, which both provide a combination of downtown vibrancy and a quiet outdoor space. However, a “bungalow courtyard” would be a way to organize smaller buildings – townhomes, duplexes, etc. – around an outdoor garden space. Because of their use of smaller buildings, it would be easy to construct a bungalow courtyard project in stages – perhaps with 2-4 unit projects that are financed by FHA loans.


Downtown Kalamazoo sees 12 condominiums sell in any given year; currently, very few units are listed for sale on the MLS. Couple this with the 2014 housing study that determined a market for up to 84 for-sale units every year for 5 years, and even a pessimistic reading of the demand says that the market is under-served.

While any real estate endeavor is risky, the market is telling us that there is demand for Missing Middle housing types and that there is an untapped condominium market in downtown Kalamazoo. A well-planned, carefully-staged project could help to meet that demand while provide a comfortable return for the developer. This  is an untapped opportunity for individuals and smaller development companies to move into the downtown housing market.

The key is finding a lot that is just the right size for your project. It will take some digging, but once you know what to look for, you’ll see opportunity on almost every corner.